FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to
_______________
Commission file number 0-19179
-----------
CT COMMUNICATIONS, INC.
- -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1837282
- -----------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
68 Cabarrus Avenue, East
P.O. Box 227, Concord, N.C. 28025
- -------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 722-2404
- -------------------------------------------------------------------
(Registrant's telephone number, including area code)
- -----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
1,485,024 shares of Common Stock outstanding as of
September 30, 1996.
Voting - 227,019
Class B Non-Voting - 1,258,005
CT COMMUNICATIONS, INC.
INDEX
Page No.
--------
PART I. Financial Information
Balance Sheets --
Sept. 30, 1996 and December 31, 1995 2-3
Statements of Income --
Three and Nine Months Ended Sept. 30, 1996 and 1995 4
Statements of Cash Flows --
Nine Months Ended Sept. 30, 1996 and 1995 5
Notes to Financial Statements 6-8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-15
PART II. Other Information 16
PART I. FINANCIAL INFORMATION
CT COMMUNICATIONS, INC.
Consolidated Balance Sheets
Unaudited
ASSETS
September 30, December 31,
1996 1995
Current assets: ----------- ------------
Cash and cash equivalents $ 6,036,752 $4,751,204
Short-term investments 216,157 2,711,699
Accounts receivable, net of allowance
for doubtful accounts of $100,000
in 1996 and 1995 6,625,257 8,878,698
Refundable income taxes --- 176,228
Materials and supplies 2,659,244 1,803,419
Deferred income taxes --- 71,324
Prepaid expenses and other
assets 150,350 533,385
------------ ------------
Total current assets 15,687,760 18,925,957
Investments securities 5,475,126 9,074,888
Investments in affiliates 26,627,179 21,788,955
Property, plant & equipment:
Telephone plant in service:
Land, buildings, and general
equipment 22,510,661 17,400,228
Central office equipment 50,238,029 47,037,535
Poles, wire, cables and
conduit 69,318,206 65,849,055
Construction in progress 1,140,234 14,483
143,207,12 130,301,301
Less accumulated depreciation 78,401,089 72,325,624
------------ ------------
Net property, plant, and equipment 64,806,041 57,975,677
------------- ------------
TOTAL ASSETS $112,596,106 $107,765,477
============= ============
(Continued)
Consolidated Balance Sheets, (Continued)
LIABILITIES & STOCKHOLDERS' EQUITY
Unaudited
September 30, December 31,
1996 1995
Current liabilities: ------------ -----------
Current portion of long-term debt &
redeemable preferred stock $ 2,072,500 $ 652,500
Accounts payable 7,515,802 8,852,272
Customer deposits and advance billings 1,117,714 1,080,773
Accrued payroll 666,826 468,390
Accrued pension cost 1,064,246 1,143,033
Other accrued liabilities 1,489,491 500,654
Income taxes payable 457,270 ---
----------- -----------
Total current liabilities 14,383,849 12,697,622
------------ -----------
Long-term debt 2,169,000 4,074,000
------------ ----------
Deferred credits and other liabilities:
Deferred income taxes 1,130,006 1,568,455
Investment tax credits 1,062,686 1,148,850
Regulatory liability 2,570,157 2,633,285
Postretirement benefits other than
pension 9,129,958 8,104,965
----------- ------------
Other 1,103,098 1,103,098
14,995,905 14,558,653
Redeemable preferred stock, $100 par value:
4.8% series; authorized 5,000 shares;
issued and outstanding 1,750 shares
in 1996 and 1995 162,500 162,500
------------ -----------
Total liabilities 31,711,254 31,492,775
------------ -----------
Stockholders' equity:
Preferred Stock not subject to mandatory redemption:
5% series, $100 par value; 15,087 shares
outstanding 1,508,700 1,508,700
4.5% series, $100 par value; 2,000 shares
outstanding 200,000 200,000
Discount on 5% preferred stock (16,059) (16,059)
Common stock:
Voting, 227,019 shares outstanding 4,021,094 4,021,094
Nonvoting, outstanding 1,258,005
shares in 1996 and 1,256,001
in 1995 23,317,281 23,114,777
Other capital 298,083 298,083
Unearned compensation (198,497) (60,752)
Unrealized gain on securities available-
for-sale 893,048 1,196,766
Retained earnings 0,861,202 46,010,093
------------ -----------
Total stockholders' equity 80,884,852 76,272,702
------------ -----------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $112,596,106 $107,765,477
=========== ===========
See Accompanying Notes To Financial Statements.
CT COMMUNICATIONS, INC.
Consolidated Statements of Income
For 3 and 9 months ended September 30, 1996 and 1995
Unaudited
Three Months Ended
------------------
September 30,
-------------
OPERATING REVENUES: 1996 1995
---- ----
Local service $ 6,173,732 $5,375,407
Access and toll service 9,849,842 6,438,006
Other and unregulated 2,645,408 2,251,026
Less provision for uncollectible
accounts 38,034 (105,624)
------------ -----------
Total operating revenues 18,707,016 13,958,815
OPERATING EXPENSES:
Plant specific 7,565,899 3,405,436
Depreciation and amortization 3,009,958 3,615,590
Customer operations 1,780,148 1,415,186
Corporate operations 2,459,636 1,731,375
------------ -----------
Total operating expenses 14,815,641 10,167,587
------------ ----------
Net operating revenues 3,891,375 3,791,228
OTHER INCOME (EXPENSES):
Equity in income of affiliates 358,699 180,469
Interest, dividend income and
gain on sale 892,116 837,010
Other expenses, principally interest (441,269) (143,667)
------------ ---------
Total other income 809,546 873,812
------------ ---------
Income before income taxes 4,700,921 4,665,040
Income taxes 2,139,354 1,706,060
------------ ---------
Net income 2,561,567 2,958,980
DIVIDENDS ON PREFERRED STOCK 23,128 23,278
------------ -----------
EARNINGS FOR COMMON STOCK $ 2,538,439 $2,935,702
============ ============
EARNINGS PER COMMON SHARE* $ 1.71 $ 1.98
============ ============
DIVIDENDS PER COMMON SHARE* $ .70 $ .68
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING* 1,485,024 1,480,806
*See accompanying notes to financial statements.
<PAGE>
CT COMMUNICATIONS, INC.
Consolidated Statements of Income
For 3 and 9 months ended September 30, 1996 and 1995
Unaudited
Nine Months Ended
-----------------
September 30,
------------
OPERATING REVENUES: 1996 1995
Local service $17,556,408 $15,691,350
Access and toll service 22,213,474 18,980,097
Other and unregulated 7,621,748 6,690,654
Less provision for uncollectible
accounts (135,341) (208,436)
----------- ------------
Total operating revenues 47,256,289 41,153,665
OPERATING EXPENSES:
Plant specific 15,558,184 9,815,481
Depreciation and amortization 7,575,129 7,594,559
Customer operations 5,166,996 4,416,352
Corporate operations 7,761,107 5,720,225
---------- -----------
Total operating expenses 36,061,416 27,546,617
---------- -----------
Net operating revenues 11,194,873 13,607,048
OTHER INCOME (EXPENSES):
Equity in income of affiliates 2,345,333 1,790,812
Interest, dividend income and
gain on sale 1,123,902 1,321,177
Other expenses, principally interest (998,719) (835,176)
--------- ------------
Total other income 2,470,516 2,276,813
----------- -----------
Income before income taxes 13,665,389 15,883,861
Income taxes 5,683,810 5,824,596
------------ -----------
Net income 7,981,579 10,059,265
DIVIDENDS ON PREFERRED STOCK 69,382 69,832
------------- -----------
EARNINGS FOR COMMON STOCK $ 7,912,197 $ 9,989,433
============ ===========
EARNINGS PER COMMON SHARE* $ 5.33 $ 6.76
============ ===========
DIVIDENDS PER COMMON SHARE* $ 2.08 $ 2.02
============ ===========
WEIGHTED AVERAGE SHARES OUTSTANDING* 1,484,691 1,477,749
*See accompanying notes to financial statements.
CT COMMUNICATIONS, INC.
Statements of Cash Flows
For 9 months ended September 30, 1996 and 1995
Unaudited
1996 1995
------ ------
Cash flows from operating activities:
Net income $ 7,981,579 $10,059,265
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,575,129 7,594,559
Deferred income taxes and tax credits (453,289) (1,520,155)
Postretirement benefits 1,024,993 1,259,894
Loss on retirement of non-regulated
property 1,323 5,178
Loss (gain) on sale of investments 78,581 (148,680)
Undistributed income of affiliate (2,345,332) (1,790,812)
Decrease (increase) in accounts
receivable 2,253,441 (1,800,857)
(Increase) in materials and supplies (855,825) (370,092)
Unrealized loss recorded in investment
securities 497,996 ---
Decrease in other assets 383,035 137,680
(Decrease) increase in accounts
payable (1,336,470) 925,235
Increase in customer deposits and advance
billings 36,941 65,246
Increase in accrued liabilities 1,045,358 1,048,867
Increase in income taxes payable (633,498) (567,852)
Unearned compensation 137,745 ---
----------- -----------
Net cash provided by operating
activities 15,391,707 14,897,476
Cash flows from investing activities:
Capital expenditures in telephone
plant (13,631,677) (12,097,546)
Removal cost - telephone plant
retired (156,794) (136,779)
Purchase of investments in affiliates (3,637,492) (3,573,679)
Purchases of investment securities (1,033,359) (3,649,386)
Maturities of investment securities 1,328,126 ---
Partnership capital distribution 1,144,600 648,712
Sales of investment securities 5,223,960 2,634,747
----------- -----------
Net cash used in investing activities(10,762,636) (16,173,931)
------------ ------------
Cash flows from financing activities:
Repayment of long-term debt (485,000) (1,372,500)
Dividends paid (3,144,595) (3,032,225)
Proceeds from common stock issuance 186,955 500,449
Tax benefit from ESOP distribution 15,549 ---
Other 83,568 40,364
----------- -----------
Net cash used in financing activities(3,343,523) (3,863,912)
------------ ------------
Net increase (decrease) in cash and
cash equivalents 1,285,548 (5,140,367)
Cash and cash equivalents-beginning
of period 4,751,204 8,346,235
------------ -----------
Cash and cash equivalents-end of
period $ 6,036,752 $ 3,205,868
============ ===========
See Accompanying Notes To Financial Statements.
CT COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited
financial statements contain all adjustments (consisting of
only normal recurring accruals) necessary to present fairly
the financial position as of September 30, 1996, and the
results of operations for the three months and nine months
then ended and cash flows for the nine months then ended.
2. The results of operations for the three months and nine
months ended September 30, 1996 and 1995 are not necessarily
indicative of the results to be expected for the full year.
3. The following is a summary of common stock transactions
during the nine months ended September 30, 1996.
.....Voting.....
Shares Value
------ -----
Outstanding at December 31, 1995...... 75,673 $4,021,094
Issued for stock split distributed
5/30/96 to holders of record 5/03/96 51,346 ---
------- ----------
Outstanding at September 30, 1996......227,019 $4,021,094
======= ==========
Weighted average shares outstanding
for the nine months ended
September 30, 1996..................227,019
Class B Non-Voting
Shares Value
------ -----
Outstanding at December 31, 1995. 418,667 $23,114,777
Issuance of common stock......... 668 186,955
Issued for stock split distributed 5/30/96
to holders of record 5/03/96.. 838,670 ---
Tax benefit from exercise of options --- 15,549
--------- -----------
Outstanding at September 30, 1996 1,258,005 $23,317,281
========= ===========
Weighted average shares outstanding
for nine months ended
September 30, 1996................1,257,672
On April 26, 1996, the Board of Directors declared a three
for one stock split (two new shares for each share held) payable
May 30, 1996 to shareholders of record May 3, 1996. This created
an additional 151,346 shares of common voting and 838,670 shares
of Class B non-voting shares. These amounts are reflected in all
share data presented herein.
4. SECURITIES AVAILABLE-FOR-SALE
September 30, 1996
------------------------------
Gross Unrealized
------------------
Securities Amortized Fair
Available-for-Sale Cost Gains Losses Value
------------------ ---- ----- ------ -----
State, county and municipal
debt securities $3,388,549 $ 6,042 $ 13,508 $3,381,083
Equity Securities 843,505 2,394,207 927,512 2,310,200
---------- ---------- -------- ----------
Total $4,232,054 $2,400,249 $941,020 $5,691,283
========== ========== ======== ==========
Amortized Cost Fair Value
-------------- ----------
Current $ 245,147 $ 216,157
Due after one through five years 2,016,602 2,015,375
Due after five through ten years 1,126,800 1,149,551
Equity securities 843,505 2,310,200
---------- ----------
Total $4,232,054 $5,691,283
========== ==========
5. INVESTMENTS IN AFFILIATED COMPANIES
9/30/96 12/31/95
--------- ----------
ITC Associates Partnership (equity method) $ 5,519,832 $ 5,519,832
RSA 15 Partnership (equity method) 6,412,433 4,844,472
BellSouth Carolinas PCS, LP (equity method) 6,459,257 4,597,756
U.S. Telecom Holdings (equity method) 3,520,833 3,520,833
Wireless 1 - Carolinas (equity method) 1,322,403 240,000
ITC Holdings (equity method) 658,354 658,354
ITN Charter (cost method) 789,347 789,347
U.S. Intelco (cost method) 279,277 279,277
Ellerbe Partnership (equity method) 1,159,826 898,959
Access On (equity method) 271,035 271,035
Embion of North Carolina (equity method) --- 63,747
Data Base Network Services, Ltd. (cost method)* 123,747 ---
Other, at cost which approximates market 110,835 105,343
------------ ------------
TOTAL $ 26,627,179 $ 21,788,955
============ ============
* The Registrant's interest in Embion of North Carolina was exchanged
April 26, 1996 for 15,000 shares of Data Base Network Services, Ltd.
<PAGE>
6. LONG-TERM DEBT:
Long-term debt excluding annual maturities comprised the following:
First Mortgage Bonds: September 30, 1996 December 31, 1995
-------------------- ------------------ -----------------
6 1/4% Series F, due 3/1/97 $ --- $ 1,440,000
Note payable to a bank @ 7.25%
due in installments until 2001 2,169,000 2,634,000
----------- -----------
TOTAL $ 2,169,000 $ 4,074,000
=========== ===========
Annual maturities and sinking fund requirements of the long-term debt
outstanding for the five year period subsequent to September 30, 1996 are
as follows: $155,000 in 1996; $2,060,000 in 1997; $620,000 in 1998, 1999
and 2000; and $154,000 thereafter.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of the Company decreased during the nine month
period ending September 30, 1996. Current assets exceeded current
liabilities by $1,303,911 at September 30, 1996. In comparison,
current assets exceeded current liabilities by $6,228,335 at
December 31, 1995.
Current assets decreased by $3,238,197 when compared to
December 31, 1995. This decrease is primarily due to a decrease in
short-term investments of $2,495,542, which were applied to
investments in affiliates; a decrease in accounts receivable of
$2,253,441 due to an adjustment to reconcile customer accounts
receivable and accelerated collection; a decrease in deferred income
taxes of $71,324; a decrease in refundable income taxes of $176,228;
and a decrease in prepaid expenses of $383,035, primarily prepaid
directory expense and prepaid insurance. The decreases were offset
in part by an increase in materials and supplies of $855,825 and an
increase in cash and cash equivalents of $1,285,548.
Current liabilities increased by $1,686,227 during the nine
months ending September 30, 1996. This increase is primarily from
the reclassification of long-term debt to current liabilities for
the March 1, 1997 maturity of First Mortgage bonds in the amount of
$1,420,000. Accounts payable decreased $1,336,470 due to payments
made to creditors and other accrued liabilities increased $988,837
primarily due to an increase in accrued property taxes of $495,000
and an accrual for anticipated over earnings of $600,000. This
accrual was made to address a North Carolina Utilities Commission
notice identifying the Registrant as having earnings in excess of
the maximum rate of return authorized by the Utilities Commission.
The Company's primary source of liquidity is funds provided by
operations. During the nine months ended September 30, 1996, cash
provided by operations totaled $15,391,707.
The primary use of cash during this period was for normal
additions to telephone plant - $13,631,677, purchase of investments
in affiliates - $3,637,492, payment of dividends - $3,144,595 and
purchase of investment securities - $1,033,359. BellSouth Carolinas
PCS LP received $2,489,600 of the cash expended for investments in
affiliates. Funds needed in excess of those generated by operations
were generated by the sale or maturity of investments available for
sale and partnership capital distributions. Sales and maturities of
these investments totaled $6,552,086 during the nine months ending
September 30, 1996.
At September 30, 1996, the Company's investment portfolio
totaled $5.7 million, all of which could be pledged to secure
additional borrowing, or sold, if needed for liquidity purposes.
There are no plans to borrow additional funds at this time. At
September 30, 1996, the Company had available lines of credit
totaling $13,500,000, none of which was outstanding. Management
believes the liquidity is adequate to meet the operational needs of
the Company.
RESULTS OF OPERATIONS
3 MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
Operating revenues increased $4,748,201 or 34% for the three
months ended September 30, 1996 compared to same period of 1995.
Local service revenues increased $798,325 or 14.85% during this
period. This growth is a result of improved demand for service and
the metro calling plan which allocates more revenues to local
service. It is expected that growth in this classification of
revenues will continue throughout this year.
On November 1, 1996, the Registrant asked the North Carolina
Utilities Commission (NCUC) to approve a new rate plan which will
substantially expand the area in which customers can call without
paying long distance charges. If approved, this plan will initially
reduce revenues by about $722,000 the first year; however, it will
allow the Registrant to prepare for competition in the local area of
operations. A more detailed discussion is below.
Access and toll revenues increased $3,411,836 or 53% for the
three months ended September 30, 1996 when compared to the same
period of 1995. This increase is primarily a result of the
reclassification of access and settlement charges from an offsetting
revenue account to an expense category. This amount is $2,382,954
for 1996 or 70% of the increase. This represents charges for the
entire year of 1996. Amounts for 1995 are not reclassified. The
remaining increase, $1,028,882, is generated by increased marketing
and sales efforts and increased calling volumes by the interexchange
carriers.
Other and unregulated income increased $394,382 or 17.5% for
this period. This increase results primarily from an increase of
$206,423 in non-regulated income, net. This increased amount is a
result of increased sales efforts in customer premise equipment and
increased billing and collection charges. The Company is placing
more emphasis on the non-regulated area of operations and it is
expected that non-regulated income will continue to increase.
Provision for uncollectible accounts decreased for this period
due to increased collections of amounts previously written off.
Operating expenses, exclusive of depreciation, increased
$5,253,686 or 80.2%. Plant specific expenditures increased
$4,160,463 or 122% for this period when compared to the same period
of 1995. This increase results from the reclassification of access
and toll settlement charges from an offsetting revenue account to an
expense account in the amount of $2,382,954; increased maintenance
expenditures in the outside plant operations of $699,172 due to
extensive construction work on cable and pole line facilities; and
increased access expense of $885,754 due to increased toll volumes
generated by long distance sales. Also non-regulated expense
increased by $124,916 due to increased activity in the non-regulated
area of operation.
RESULTS OF OPERATIONS (CON'T.)
3 MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 (Con't.)
Corporate and customer operations expense increased $1,093,223
or 34.7% for this period when compared to the same period of 1995.
Approximately $457,027 of this amount relates to product management
and advertising. General and administrative expense constitute
$458,835 of this increase. The Registrant is placing more emphasis
on development of product identity through increased advertising and
has committed considerable expenditures in work process re-engineering
and advanced internal information processing.
Depreciation expense decreased $605,632 or 17% for this period
when compared to 1995. An additional accrual of $600,000 has been
recorded in this expense category for this period in expectation of
earnings in excess of the maximum rate of return authorized by the
North Carolina Utilities Commission. Also during the comparable
period of 1995, a special amortization charge was recorded in the
amount of $1,500,000. Without this amortization and accrual,
depreciation and amortization would have been increased $294,368,
which is a result of an increased depreciable base and higher rates
in effect for this period.
Other income decreased $64,101 or 7.3% for this period. This
amount results from an increase in equity in income of affiliates of
$178,230 during 1996 and an increase in interest income, dividend
income and gain on sale of $55,106 which was offset in part by an
increase in other expense, principally interest, of $297,602.
Income taxes increased approximately $433,294 or 25% for this
period due to increased taxable income for this period.
The PCS network became operational during this period. It
incurred losses due to start up costs of approximately $108,000.
Losses related to start up costs are expected to occur over the next
three years but are not expected to be material to overall
operations.
RESULTS OF OPERATIONS
9 MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
Operating revenues increased $6,102,624 or 15% for the nine
months ended September 30, 1996, over the nine months ended
September 30, 1995.
Local service revenues increased $1,865,058 or 11.9% during
this period. This growth is a result of improving growth in demand
for service and a metro calling plan which allocates more revenues
to local service. It is expected that growth in this classification
of revenues will continue throughout this year.
RESULTS OF OPERATIONS (Con't.)
9 MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 (Con't.)
Access toll and revenues increased $3,233,377 or 17.0% during
the nine months ended September 30, 1996 when compared to the nine
months ended September 30, 1995. This increase is primarily a
result of the reclassification of access and settlement charges from
an offsetting revenue account to an expense category. This amount,
$2,382,954, is for the entire year of 1996 and is 73.7% of the total
increase for the period. Amounts for 1995 are not reclassified.
The remaining increase is a result of increased marketing and sales
efforts and increased calling volumes by the interexchange carriers.
Other and unregulated operating revenues increased $931,094 or
13.9% during this period in comparison to the same period of the
previous year. This increase is a result of larger amounts of
non-regulated revenues and increased billing and collection revenues.
The Company is placing more emphasis on the non-regulated area of
operations and it is expected that non-regulated income will
continue to increase.
Operating expenses, exclusive of depreciation, for the nine
month period ended September 30, 1996 increased $8,534,229 or 42.8%.
Plant specific expenditures increased $5,742,703. This increase
results from the reclassification of access and toll settlement
charges from an offsetting revenue account to an expense account in
the amount of $2,382,954; increased maintenance expenditures in the
outside plant operations of $1,422,925 due to extensive construction
work on cable and pole line facilities; and increased access expense
of $1,335,909 due to increased toll volumes generated by long
distance sales. Also non-regulated expense increased by $600,915
due to increased activity in the non-regulated area of operations.
The remainder primarily relates to the development of an internal
management information network.
Corporate and customer operations expense increased $2,791,526
or 28% for this period when compared to the same period of 1995.
Approximately $599,681 of this amount relates to product management
and advertising. $603,057 relates to additional efforts being
placed in customer service operations and $815,929 relates to
consulting fees for work process re-engineering and software for a
new accounting system. The remainder primarily relates to an
adjustment to reconcile customer accounts receivable.
Depreciation expense decreased $19,430 for the nine month
period when compared to the same period of 1995. An additional
accrual of $600,000 was recorded to this expense in anticipation of
earnings in excess of the maximum rate of return authorized by the
North Carolina Utilities Commission. Also during the comparable
period of 1995, a special amortization was recorded in the amount of
$1,500,000. Without this accrual and previous special amortization,
depreciation and amortization would have increased $880,570 which is
a result of an increased depreciable base and increased rates.
RESULTS OF OPERATIONS (Con't.)
9 MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 (Con't.)
Other income increased $193,703 for this period. This
increased amount in other income is primarily the recognition of
additional income in earnings of affiliates of $554,521 over amounts
accrued in 1995. The additional income was offset by decreased
interest income, dividend income, and gain on sale of $197,275 and
an increase in other expenses of $163,378. Interest income
decreased due to smaller amounts invested in interest earning assets
and lower earning rates.
Income taxes decreased approximately 2.4% as a result of lower
taxable income during this period.
The PCS network became operational during this period. It
incurred losses due to start up costs of approximately $108,000.
Subsequent losses are not expected to be material to overall
operations. Losses related to start up costs are expected to occur
over the next three years but are not expected to be material to
overall operations.
REQUEST FOR NEW RATE PLAN
The Registrant has asked the North Carolina Utilities
Commission (NCUC) to approve a new rate plan that will substantially
expand the area in which customers can call without paying long
distance charges.
The new plan also provides customers with 30 minutes of free
calling each month into the metro area, which includes Charlotte;
simplifies pricing for long distance calls into the western North
Carolina area; reduces overall telephone costs for customers; and
paves the way for competition to emerge for local dial tone service
in the Registrant's franchise area.
Under the proposed rate structure, the Registrant's residential
customers, except those in the Harrisburg exchange, will pay $10.50
per month for basic local service, including touch-calling, which is
currently a separate charge of 50 cents per month. Harrisburg
customers will pay a slightly higher charge -- $12 per month --
because they can call more customers under that community's basic
plan.
Although these new prices reflect an increase for basic
service, other changes in the plan will offset these increases for
many customers, and overall the plan will initially reduce the
Registrant's revenues by about $722,000 a year.
The Registrant proposes opening up all local exchange lines to
toll-free calling, making it possible to call throughout areas of
Cabarrus, Rowan and Stanly counties served by the Registrant without
incurring a long distance charge.
In addition to offering 30 minutes of free calling each month
in the metro area, the Registrant is also proposing to expand the
metro area to include Matthews, Huntersville, Davidson and other
surrounding communities.
Metro calling rates are being simplified, with plans tailored
to individual calling needs. Customers may select a pre-set number
of minutes for a flat monthly rate based on their needs and purchase
additional minutes for as low as seven cents each. For very heavy
callers, the Registrant is offering an unlimited metro calling
package for residential customers only.
Other significant elements of the plan include elimination of a
separate charge for touch-calling and reductions in charges for long
distance calls into a broader calling zone that extends into western
North Carolina.
A driving force behind the Registrant's new rate plan is
customer demand for expanded calling options to areas beyond their
home communities. A new state law that took effect in July (HB161)
is helping to make it possible for the Registrant to meet this type
of customer demand.
Under this new legislation, telephone companies are given
greater flexibility in setting their price structures, which is a
key element in the Registrant's ability to offer expanded services.
In exchange for greater flexibility in setting prices, however,
local telephone companies must agree to open their markets to
competition for local dial tone service -- the last area of
telecommunications services to be deregulated.
Under its "Price Regulation" filing, the Registrant is agreeing
to open up its markets to competition for local dial tone service,
provided it is allowed to "rebalance" or adjust its rates at the
same time. By rebalancing rates, Management believes the Registrant
can compete in emerging markets and still sustain local rates that
are affordable.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The foregoing discussion contains forward-looking statements
about the Registrant's financial condition and results of
operations, which are subject to certain risks and uncertainties
that could cause actual results to differ materially from those
reflected in the forward-looking statements. Readers are cautioned
not to place undue reliance on these forward-looking statements,
which reflect management's judgment only as of the date hereof. The
Registrant undertakes no obligation to publicly revise these
forward-looking statements to reflect events and circumstances that
arise after the date hereof.
Factors that may cause actual results to differ materially from
these forward-looking statements are (1) the Registrant's ability to
respond effectively to the sweeping changes in industry conditions
created by the Telecommunications Act of 1996, and related state and
federal legislation and regulations, (2) whether the North Carolina
Utilities Commission grants the Registrant's proposed rate plan and,
if granted, the Registrant's ability to implement the plan, (3) the
Registrant's ability to recover the substantial costs to be incurred
in connection with the implementation of its PCS business, and (4)
the Registrant's ability to retain its existing customer base
against local and long distance service competition, and to market
such services to new customers.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The registrant is not involved in any material legal proceedings at
September 30, 1996, except as previously disclosed in Item 3 of its
annual report on Form 10-K for year ended December 31, 1995 and in
Note 9 to the registrant's financial statements included therein.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation of
the Registrant, as amended.
3.2 By-laws of the Registrant,
as amended.
27 Financial Data Schedules.
b) Reports on Form 8-K
There were no current reports on Form 8-K filed during the
third quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CT COMMUNICATIONS, INC.
---------------------------------
(Registrant)
/s/ BARRY R. RUBENS
---------------------------------
Barry R. Rubens
Senior Vice President,
Secretary and Treasurer
November 12, 1996
- ----------------------------
Date
(The above signatory has dual responsibility as duly authorized
officer and principal financial and accounting officer of the
registrant.)
EXHIBIT INDEX
Sequential
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE NO.
3.1 Articles of Incorporation of
the Registrant, as amended
3.2 By-laws of the Registrant,
as amended.
27 Financial Data Schedules.
ARTICLES OF INCORPORATION
OF
CT COMMUNICATIONS, INC.
The undersigned person does hereby organize a business corporation under
the laws of the State of North Carolina, as contained in Chapter 55 of the
General Statutes of North Carolina, entitled "North Carolina Business
Corporation Act" and the several amendments thereto, and to that end does
hereby set forth:
1. The name of the Corporation is "CT Communications, Inc.".
2. The aggregate number of shares which the Corporation shall have
authority to issue is Eighteen Million Nineteen Thousand (18,019,000) shares
of capital stock which shall be classified and bear designations as follows:
(a) Three Million (3,000,000) shares of common stock designated
Voting Common Stock.
(b) Fifteen Million (15,000,000) shares of common stock designated
as Class B Nonvoting Common Stock. These shares shall be in all
respects the same as the Voting Common Stock except that the share shall not
be entitled to vote.
(c) Two Thousand (2,000) shares of preferred stock designated as
Four and One-half Percent Preferred Stock.
(d) Seventeen Thousand (17,000) shares of preferred stock
designated as Five Percent Preferred Stock.
3. The holders of the Four and One-Half Percent Preferred Stock shall
be entitled to receive, when and as declared from the surplus or net profits
arising from the business of the Corporation, cumulative dividends at the
rate of four and one-half percent (4-1/2%) per annum, and no more, payable
either quarterly, semiannually or annually as determined by the Board of
Directors, before any dividends shall be paid to the common stock, which shall
be entitled to receive any and all sums which may be distributed as dividends
in excess of the said dividends on the Four and One-half Percent Preferred
Stock.
Upon any distribution of capital assets, this Preferred Stock shall be
entitled to receive the sum of one hundred dollars ($100) a share, together
with a sum equivalent to all unpaid dividends (if any) accumulated thereon,
before any distribution shall be made to the common stock, which shall be
entitled to receive all the remainder of any capital assets so distributed.
This Preferred Stock shall be subject to redemption, either in whole or
in part, at the option of the Corporation upon any dividend date at one
hundred dollars ($100) per share, plus any unpaid accumulated dividends to
date of redemption, upon the vote of not less than a majority in interest of
the outstanding Voting Common Stock. Notice of the intention of the
Corporation to redeem this Preferred Stock shall be mailed thirty days before
the date of redemption to each holder of record of Four and One-half Percent
Preferred Stock at his last known post office address, and dividends on such
shares of stock as shall have been so called for redemption shall not accrue
after the redemption date given in said notice.
This Preferred Stock shall not have any voting rights.
4. The holders of the Five Percent Preferred Stock shall be entitled to
receive thereon from the surplus or net profits arising from the business of
the Corporation a fixed cumulative dividend when and as declared by the Board
of Directors of five percent (5%) per annum, and no more, payable
semiannually on the first day of January and July of each year. Should the
surplus or net profits arising from the business of this Corporation prior to
any dividend date be insufficient to pay the dividend on this Five Percent
Preferred Stock, such dividend shall be payable from future profits, and no
dividend shall at any time be paid on the common stock until the full amount
of five percent (5%) per annum up to such time shall have been paid or set
apart.
In the event of dissolution or liquidation of this Corporation,
the holders of the Five Percent Preferred Stock shall be entitled to receive
the par value of their stock, together with accumulated dividends thereon to
the date of payment, before holders of the common stock shall be entitled
to receive anything thereon. Thereafter the Five Percent Preferred Stock
shall not been titled to share in the assets of the Corporation.
The Five Percent Preferred Stock may be called or redeemed in whole or in
part on any semi-annual dividend payment date, at the option of the Board of
Directors, at the price of One Hundred Dollars ($100) per share and all
unpaid dividends accrued on such share. Not less than thirty (30) days
prior notice to the holders of record of the Five Percent Preferred Stock
shall be given by mailing notice to the last known address of the holder
thereof or by giving such other notice as may be prescribed by the bylaws or
by resolution of the Board of Directors.
The Five Percent Preferred Stock shall not have any voting rights.
5. The address of the initial registered office of the Corporation is
68 Cabarrus Avenue, East, Concord, Cabarrus County, North Carolina 28026-0227
and the name of the initial registered agent at such address is
Michael R. Coltrane.
6. The name and address of the sole incorporator is:
Name Address
Michael R. Coltrane 68 Cabarrus Avenue, East
Concord, NC 28026-0227
7. The number of directors constituting the initial board of directors
shall be seven (7) and the names and addresses of the persons who are to
serve as directors until the first annual meeting of shareholders, or until
their successors are elected and qualified, are:
Name Address
Betty Gay C. Bivens 400 Avinger Lane
Cottage 424
Davidson, NC 28036
John R. Boger, Jr. P. 0. Box 810
Concord, NC 28026-0810
Lester D. Coltrane, III 151 Ingleside Drive
Concord, NC 28025
Michael R. Coltrane 68 Cabarrus Avenue, East
Concord, NC 28026-0227
Jerry H. McClellan 68 Cabarrus Avenue, East
Concord, NC 28026-0227
Mariam C. Schramm 400 Avinger Ln, Apt. 201
Davidson, NC 28036
Phil W. Widenhouse 215 Union St., South
Concord, NC 28025
8. The purposes for which the corporation is organized are:
(a) To transact, operate and carry on in all of its branches a
general telecommunication business in Cabarrus, Rowan, and Stanly
counties and elsewhere in North Carolina with exchanges at Concord,
Kannapolis, China Grove - Landis, Mt.Pleasant, Harrisburg, Albemarle,
Badin, Oakboro, and New London and at such other places in North
Carolina or outside of North Carolina as seem to be desirable, either
directly or through subsidiaries and affiliates; and
(b) To engage in any lawful act or activity for which corporations
may be organized under Chapter 55 of the General Statutes of North
Carolina, entitled "North Carolina Business Corporation Act".
9. The shareholders shall not be entitled to cumulate their votes for
directors of the Corporation.
10. (a) In addition to any affirmative vote required by law or these
Articles of Incorporation, any "Business Combination" (as defined below)
involving the Corporation or any subsidiary thereof and any "Interested
Shareholder" (as defined below) shall require the affirmative vote of the
holders of at least 80% of the voting power of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the election
of directors (the "Voting Stock"), voting together as a single class, unless
the Business Combination is approved by a majority of (i) the directors who
are unaffiliated with the Interested Shareholder and who were directors
before the Interested Shareholder became an Interested Shareholder
("Disinterested Directors"), and (ii) any successor or successors to any of
the Disinterested Directors who are not affiliated with an Interested
Shareholder and who were recommended by a majority of the Disinterested
Directors then on the Board. The 80% affirmative vote set forth above
shall be required, notwithstanding the fact that no vote may be required,
or that a lesser percentage may be specified, by law or otherwise.
(i) For purposes of this Article 10, the term "Business
Combination" and "Business Combinations" includes the
following transactions: (A) a merger or consolidation of the
Corporation or any subsidiary thereof with an Interested
Shareholder or with any other corporation or entity which is, or
after such merger or consolidation would be, an Affiliate (as
defined below) of an Interested Shareholder; (B) any sale, lease,
exchange or other disposition of the Corporation or any subsidiary
thereof of 20% or more of the total assets of the Corporation
(with the total assets determined as of the most recently audited
financial statements of the Corporation) if an Interested
Shareholder (or an Affiliate thereof) is a party to the
transaction; (C) the issuance of stock or other securities of the
Corporation or any subsidiary thereof to an Interested
Shareholder (or an Affiliate thereof) in exchange for cash or
property (including stock or other securities) having an aggregate
fair market value equal to or greater than 20% of the total assets
of the Corporation (with the total assets determined as of the most
recently audited financial statements of the Corporation); (D) the
adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder (or an Affiliate thereof); or (E) any
reclassification of securities (including any reverse
stock split), recapitalization, merger with a subsidiary or other
transaction which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding stock (or
securities convertible into stock) of any class of the
Corporation or any subsidiary thereof owned by an Interested
Shareholder.
(ii) For purposes of this Article 10, the term "Interested
Shareholder" shall mean any person (other than the Corporation or
any subsidiary thereof) who or which (A) is the beneficial owner,
directly or indirectly, of 20% or more of the voting power of the
outstanding Voting Stock; (B) is an Affiliate of the Corporation
and at any time within the two-year period immediately prior to
the date of any proposed Business Combination, was the beneficial
owner, directly or indirectly, of 20% or more of the voting power
of the then Voting Stock; or (C) is an assignee or has otherwise
succeeded to any shares of Voting Stock in a transaction not
involving a public offering which were at any time within the
two-year period prior to the date of any proposed Business
Combination beneficially owned by an Interested Shareholder.
(iii) For purposes of this Article 10, a person shall be
a "beneficial owner" of any Voting Stock: (A) if such person or
any of its Affiliates or Associates (as herein defined)
beneficially owns, directly or indirectly; or (B) if such person
or any of its Affiliates or Associates has (1) the right to acquire
(whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants, options or otherwise or (2) the right to vote
pursuant to any agreement, arrangement or understanding; or (C)
which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares
of Voting Stock.
(iv) For purposes of this Article 10, the terms "Affiliate"
or "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended.
(b) The majority of directors of the Corporation shall have the
power and duty, among other things, to determine for purposes of this
Article 10 on the basis of information known to them after reasonable
inquiry, (i) whether a person is an Interested Shareholder, (ii) the
number of shares of Voting Stock beneficially owned by any person,
(iii) whether a person is an Affiliate or Associate of another, and
(iv) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any subsidiary in any
Business Combination has, an aggregate fair market value equal to or
in excess of 20% of the total assets of the Corporation, with the total
assets determined as of the most recently audited financial statements
of the Corporation.
(c) Nothing contained in this Article 10 shall be construed to
relieve any Interested Shareholder from any fiduciary obligation
imposed by law.
(d) Notwithstanding any other provision of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding
that a lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote
of the holders of 80% or more of the outstanding Voting Stock, voting
together as a single class, shall be required to amend or repeal, or
adopt any provision inconsistent with, this Article 10.
11. As soon as permissible by North Carolina Statutes, the Directors
shall be divided into three classes, as nearly equal in number as may be,
the term of office of those of the first class to expire at the first Annual
Meeting of Shareholders after their election, the term of office
of those of the second class to expire at the second Annual Meeting of
Shareholders after their election, and the term of office of those of the
third class to expire at the third Annual Meeting of Shareholders after
their election. At each annual election held thereafter, directors shall be
chosen for a term of three years to succeed those whose terms expire.
12. In considering or acting on an offer or proposal that relates to the
sale of all of substantially all of the assets of this Corporation, whether
or not in the usual and regular course of the business of this Corporation,
or an offer or proposal that relates to the sale of all or substantially all
of the stock of this Corporation or a sufficient amount of the voting stock
to effect the control of the Corporation, a director of this Corporation
shall consider, in determining what he or she reasonably believes to be in
the best interest of the Corporation and its subsidiaries, considered as one
enterprise, (1) the long- term, as well as the short-term, interests of the
Corporation and its subsidiaries, (2) the interests of the shareholders of the
Corporation and its subsidiaries, long-term as well as short-term, including
the possibility that those interests may be best served by the continued
independence of the Corporation and its subsidiaries, (3) the interests of
the employees, customers, creditors and suppliers of the Corporation and its
subsidiaries, and (4) community and societal considerations including those
of any community in which any office or other facility of the Corporation
and its subsidiaries is located. A Director may also in his or her
discretion consider any other factors he or she believes to be in the best
interests of the Corporation and its subsidiaries. A person who performs
his or her duties in accordance with this Article shall be deemed to have no
liability by reason of being or having been a Director of the Corporation.
13. To the fullest extent permitted by the North Carolina Business
Corporation Act, as the same exists or may hereafter be amended, a director
of the Corporation shall not be personally liable to the Corporation, its
shareholders or otherwise, for monetary damages for breach of duty as a
director. Any repeal or modification of this Article shall be prospective
only and shall not adversely affect any limitation on the personal liability
of a director of the Corporation existing at the time of such repeal or
modification.
14. A director of the Corporation may be removed only for cause by a
vote of the shareholders of the Corporation if the number of votes cast to
remove such director exceeds the number of votes cast not to remove him or
her. If a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove
such director. A director may not be removed by the shareholders at a meeting
unless the notice of the meeting states that the purpose, or one of the
purposes, of the meeting is removal for cause of the director. If any
directors are so removed, new directors may be elected at the same
meeting.
15. The provisions of the North Carolina Shareholder Protection Act
entitled "Shareholder Protection Act" of the North Carolina Business
Corporation Act shall not be applicable to this Corporation.
16. The provisions of the North Carolina Control Share Acquisition Act
entitled "Control Share Acquisitions" of the North Carolina Business
Corporation Act shall not be applicable to this Corporation.
17. These Articles will become effective when filed.
IN WITNESS WHEREOF, the incorporator has executed these Articles of
Incorporation, this the ____ day of July, 1993.
__________________________
Michael R. Coltrane,
Incorporator
BYLAWS
OF
CT COMMUNICATIONS, INC.<PAGE>
TABLE OF CONTENTS
ARTICLE I. OFFICE. . . . . . .
ARTICLE II. SHAREHOLDERS . . . . . . . . . . . . . . . . . . . .4
Section 1. Annual Meeting. . . . . . . . . . . . . . . . .4
Section 2. Substitute Annual Meeting. . . . . . . . . . . .4
Section 3. Special Meetings. . . . . . . . . . . . . . . .4
Section 4. Place of Meeting. . . . . . . . . . . . . . . . .4
Section 5. Notice of Meeting. . . . . . . . . . . . . . .4
Section 6. Closing of Transfer Books or Fixing of Record Date. 5
Section 7. Voting Lists. . . . . . . . . . . . . . . . . .5
Section 8. Quorum. . . . . . . . . . . . . . . . . . . . . .6
Section 9. Proxies. . . . . . . . . . . . . . . . . . . .6
Section 10. Voting of Shares. . . . . . . . . . . . . . . .6
Section 11. Voting for Directors. . . . . . . . . . . . . .6
Section 12. Informal Action by Shareholders . . . . . . . . .6
ARTICLE III. BOARD OF DIRECTORS. . . . . . . . . . . . . . . . .7
Section 1. General Powers. . . . . . . . . . . . . . . . .7
Section 2. Number, Tenure and Qualifications. . . . . . . .7
Section 3. Removal.. . . . . . . . . . . . . . . . . . . . .7
Section 4. Regular Meetings. . . . . . . . . . . . . . . .7
Section 5. Special Meetings. . . . . . . . . . . . . . . .7
Section 6. Notice. . . . . . . . . . . . . . . . . . . . .7
Section 7. Quorum. . . . . . . . . . . . . . . . . . . . .8
Section 8. Manner of Acting. . . . . . . . . . . . . . . . .8
Section 9. Vacancies. . . . . . . . . . . . . . . . . . . .8
Section 10. Presumption of Assent. . . . . . . . . . . . . .8
Section 11. Informal Action by Directors. . . . . . . . . .8
Section 12. Executive Committee.. . . . . . . . . . . . . . .9
ARTICLE IV. OFFICERS . . . . . . . . . . . . . . . . . . . . . .9
Section 1. Number. . . . . . . . . . . . . . . . . . . . .9
Section 2. Election of Officers. . . . . . . . . . . . . .9
Section 3. Removal. . . . . . . . . . . . . . . . . . . . .9
Section 4. Chief Executive Officer. . . . . . . . . . . . .9
Section 5. Chairman of the Board. . . . . . . . . . . . . 10
Section 6. President. . . . . . . . . . . . . . . . . . . 10
Section 7. Executive Vice President. . . . . . . . . . . 10
Section 8. Vice Presidents.. . . . . . . . . . . . . . . . 10
Section 9. Secretary. . . . . . . . . . . . . . . . . . 11
Section 10. Treasurer. . . . . . . . . . . . . . . . . . . 11
Section 11. Assistant Secretaries and Assistant Treasurers. 11
Section 12. Salaries. . . . . . . . . . . . . . . . . . . 11
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS. . . . . . . 11
Section 1. Contracts. . . . . . . . . . . . . . . . . . . 11
Section 2. Loans.. . . . . . . . . . . . . . . . . . . . . 11
Section 3. Checks and Drafts. . . . . . . . . . . . . . . 11
Section 4. Deposits. . . . . . . . . . . . . . . . . . . 12
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER. . . . 12
Section 1. Certificate for Shares. . . . . . . . . . . . 12
Section 2. Transfer of Shares. . . . . . . . . . . . . . 12
ARTICLE VII. FISCAL YEAR. . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII. DIVIDENDS . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX. SEAL. . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE X. WAIVER OF NOTICE . . . . . . . . . . . . . . . . . 13
ARTICLE XI. AMENDMENTS. . . . . . . . . . . . . . . . . . . . 13
ARTICLE XII. INDEMNIFICATION . . . . . . . . . . . . . . . . . 13
Section 1. Extent. . . . . . . . . . . . . . . . . . . . 13
Section 2. Determination. . . . . . . . . . . . . . . . . 14
Section 3. Advanced Expenses. . . . . . . . . . . . . . . 14
Section 4. Indemnified Officer. . . . . . . . . . . . . . 14
Section 5. Reliance and Consideration. . . . . . . . . . 14
Section 6. Insurance. . . . . . . . . . . . . . . . . . 15
<PAGE>
ARTICLE 1. OFFICE
The principal office of the Corporation shall be located in the City of
Concord, State of North Carolina. The Corporation may have such other
offices, either within or without the State of North Carolina, as the Board
of Directors may designate or as the business of the Corporation may require
from time to time.
The registered office of the Corporation required by the North Carolina
Business Corporation Act to be maintained in the State of North Carolina may
be, but need not be, identical with the principal office of the Corporation,
and the address of the registered office may be changed from time to time by
the Board of Directors.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held on such day as shall be fixed by the Board of Directors at a time to
be fixed by the Chief Executive Officer for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
If the day fixed for the annual meeting shall be a legal holiday in the State
of North Carolina, such meeting shall be held on the next succeeding
business day.
Section 2. Substitute Annual Meeting. If the annual meeting shall not
be held within the period designated by these Bylaws, a substitute annual
meeting may be called in accordance with the provisions of Section 5 of this
Article. A meeting so called shall be designated and treated for all
purposes as the annual meeting.
Section 3. Special Meetings. Special meetings of the share-holders, for
any purpose or purposes, unless otherwise prescribed by statute, may be
called by the Chief Executive Officer, or by the Secretary acting under his
instructions, or by the Board of Directors.
Section 4. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of North Carolina, as the place of
meeting for any annual meeting or for any special meeting called by the Board
of Directors. A waiver of notice signed by all shareholders entitled to vote
at a meeting may designate any place, either within or without the State of
North Carolina, as the place for holding such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting
shall be the principal office of the Corporation in the State of North
Carolina.
Section 5. Notice of Meeting. Written or printed notice stating the
place, day and hour of the meeting shall be delivered not less than ten nor
more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the Chief Executive Officer, or the
Secretary, or the officer or persons calling the meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail, addressed
to the shareholder at his address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid. In the
case of an annual or substitute annual meeting, the notice of meeting need
not specifically state the business to be transacted thereat unless it is a
matter, other than election of Directors, on which the vote of
shareholders is expressly required by the provisions of the North Carolina
Business Corporation Act. In the case of a special meeting, the notice of
meeting shall state the purpose or purposes for which the meeting is called.
When a meeting is adjourned for 120 days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. When a meeting
is adjourned for less than 120 days in any one adjournment, it is not
necessary to give nay notice of the adjourned meeting other than by
announcement at the meeting at which the adjournment is taken.
Section 6. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled
to receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case, 70 days. If the stock transfer
books shall be closed for the purpose of determining shareholders entitled
to notice of or to vote at a meeting of shareholders, such books
shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books the Board of Directors may fix
in advance a date in any case to be not more than seventy days and, in case
of a meeting of shareholders, not less than ten days prior to the
date on which the particular action, requiring such determination of
shareholders, is to be taken.
If the stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the recorded date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholder has been made as provided in this section, such
determination shall apply to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
Section 7. Voting Lists. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, within two days
after notice of the meeting is given for which the list was prepared, a
complete list of the shareholders entitled to vote at such meeting, or any
adjournment thereof, arranged in alphabetical order, with the address of and
the number of shares held by each. Such list, for a period beginning two
business days after notice of the meeting is given for which the list was
prepared and continuing through the meeting, shall be kept on file at the
principal office of the Corporation and shall be subject to inspection by
any shareholder at any time during usual business hours, and such list shall
also be produced and kept open at the time and place of the meeting and shall
be subject to the inspection of any shareholder during the whole time of the
meeting; provided, however, that it shall not be necessary to prepare or
produce such list in any case where the record of shareholders readily
shows in alphabetical order or by alphabetical index, and by classes or
series if such there be, the names of the shareholders entitled to vote,
with their addresses and the amounts of their holdings. The original stock
transfer books shall be prima facie evidence as to who are the shareholders
entitled to examine such list or transfer books or to vote at any meeting of
shareholders.
Section 8. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the
shares so represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. The shareholders
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary
of the Corporation before or at the time of the meeting. No proxy shall be
valid after eleven months from the date of its execution, unless otherwise
provided in the proxy.
Section 10. Voting of Shares. Each outstanding share of the Corporation
entitled to vote shall be entitled to one vote upon each matter submitted to
a vote at a meeting of shareholders. The vote of a majority of the shares
voted on any matter at a meeting of shareholders at which a quorum is
present shall be the act of the shareholders on that matter unless the vote of
a greater number is required by law, by the Articles of Incorporation of
the Corporation or by a bylaw adopted by the shareholders of the Corporation.
Voting on all matters shall be by voice vote or by a show of hands unless
the holders of more than ten percent of the shares represented at the meeting
shall, prior to the voting on any matter, demand a ballot vote on that matter.
Section 11. Voting for Directors. Unless otherwise provided in the
Articles of Incorporation or in an agreement valid under the Act, the
directors of the Corporation shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election at a meeting at
which a quorum is present. The shareholders do not have a right to cumulate
their votes for directors.
Section 12. Informal Action by Shareholders. Any action which is required
or permitted to be taken at a meeting of the shareholders may be taken
without a meeting if consent in writing, setting forth the action so taken,
shall be signed by all the persons who would be entitled to vote upon such
action at a meeting, and filed with the Secretary of the Corporation in the
minute book of the Corporation, whether done before or after the action so
taken.
ARTICLE III. BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be directed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of Directors
constituting the whole Board shall be not more than seven nor less than three
as determined by the Board. The authorized number of Directors, within the
limits above specified, may be changed by the affirmative vote of a majority
of the whole Board given at a regular or special meeting of the Board of
Directors; provided, however, that if the number so determined is to be
increased, or decreased, notice of proposed increase or decrease shall be
included in the notice of the such meeting, or all of the Directors at the
time in office shall be present at such meeting, or those not present at any
time shall waive or have waived notice thereof in writing; and provided,
further, that the number of Directors which shall constitute the whole Board
shall not be less than three nor shall it be reduced to a number less than
the number of Directors then in office unless such reduction shall become
effective only at and after the next ensuing meeting of shareholders
for the election of Directors. Any directorships not filled by the
shareholders shall be treated as vacancies to be filled by and in the
discretion of the Board of Directors. Each Director shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and qualified. Directors need not be residents of
the State of North Carolina. Each Director must own directly at least five
shares of the voting common stock of the Corporation.
Section 3. Removal. Unless otherwise provided in the Articles of
Incorporation, any director may be removed at any time only for cause by a
vote of the shareholders if the number of votes cast to remove such director
exceeds the number of votes cast not to remove him or her. If a director is
elected by a voting group of shareholders, only the shareholders of that
voting group may participate in the vote to remove such director. A director
may not be removed by the shareholders at a meeting unless the notice of the
meeting states that the purpose, or one of the purposes, of the meeting is
removal for cause of the director. If any directors are so removed,
new directors may be elected at the same meeting.
Section 4. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice at the same date and place as the annual
meeting of the shareholders. The Board of Directors may provide, by
resolution, the time, date and place, either within or without
the State of North Carolina, for the holding of additional regular meetings.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be held at any date, time and place upon the call of the Chief
Executive Officer or the Secretary acting under instructions from the
Chief Executive Officer, or upon the call of any two Directors.
Section 6. Notice. Notice of any special meeting shall be given at least
two days prior thereto by written notice delivered personally or mailed to
each Director at his business address, by telegram or facsimile machine or
telephone or other usual means of communication; provided, however, that
special meetings may be held at any date, time and place without notice by
unanimous consent of the Directors. If mailed, such notice shall be deemed to
be delivered when deposited in the United States mail so addressed, with
postage thereon prepaid. If notice is given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to
the telegraph company. If notice is transmitted by facsimile machine, such
notice shall be deemed to be delivered when sent. The attendance of a
Director at a meeting shall constitute a waiver of notice of such meeting,
except where a Director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not
lawfully called or convened. Notice of an adjourned meeting need not be
given if the time and place are fixed at the meeting adjourning and if the
period of adjournment does not exceed ten days in any one adjournment.
Section 7. Quorum. A majority of the number of Directors fixed as
provided in Section 2 of this Article III shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, but if
less than such majority is present at a meeting, a majority of the Directors
present may adjourn the meeting from time to time without further notice.
Section 8. Manner of Acting. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the
Board of Directors, except as otherwise provided in this Section. The vote
of a majority of the number of Directors fixed as provided in Section 2 of
this Article III shall be required for the adoption of a resolution
designating the Directors to constitute the Executive Committee. The vote of
a majority of the Directors then holding office shall be required for the
adoption, amendment or repeal of a bylaw which is a proper subject for such
action by the Board of Directors, or for the adoption of a resolution
dissolving the Corporation without action by the shareholders.
Section 9. Vacancies. Except as otherwise expressly required by the
provisions of the North Carolina Business Corporation Act, any vacancy
occurring in the Board of Directors may be filled by the affirmative vote
of a majority of the remaining Directors though less than a quorum of the
Board of Directors. A Director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office.
Section 10. Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be deemed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon
his arrival) to holding the meeting or transacting business thereat, or
unless his dissent or abstention from the action shall be entered in the
minutes of the meeting or unless he shall file his written dissent or
abstention to such action with the presiding officer of the meeting before
the adjournment thereof or with the Corporation immediately after the
adjournment of the meeting. Such right to dissent or abstention shall not
apply to a Director who voted in favor of such action.
Section 11. Informal Action by Directors. Action taken by a majority
of the Directors without a meeting is nevertheless action of the Board of
Directors if written consent to the action in question is signed by all the
Directors and filed with the minutes of the proceedings of the
Board of Directors, whether done before or after the action so taken.
Section 12. Executive Committee. The Board of Directors, by
resolution adopted by a majority of the number of Directors fixed as
provided in Section 2 of this Article III, may designate two or more
Directors to constitute an Executive Committee. The Executive Committee,
between meetings of the Board of Directors and subject to such limitations
as may be required by law or imposed by resolution of the Board of Directors,
shall have and may exercise all of the authority of the Board of Directors in
the management of the Corporation. The designation of the Executive
Committee and delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility or
liability imposed upon it or him by law.
Meetings of the Executive Committee may be held at any time on call of
the Chief Executive Officer or of any two members of the Committee. No
notice of a meeting need be given if a majority of the Executive Committee
is present, but whenever notice is given, a notice of one day given by mail,
telephone, telegraph or telecopy shall be sufficient. A majority of the
members shall constitute a quorum of all meetings. The Executive Committee
shall keep minutes of its proceedings and submit them to the next succeeding
meeting of the Board of Directors for approval.
ARTICLE IV. OFFICERS
Section 1. Number. The officers of the Corporation shall be the Chief
Executive Officer, the President, one or more Vice Presidents (one or two of
whom may be designated Executive Vice President), a Treasurer, one or more
Assistant Treasurers, a Secretary, and one or more Assistant Secretaries,
and a Chairman of the Board of Directors if and when such Chairman of
the Board shall be deemed necessary or desirable, and such other officers and
assistant officers as the Board of Directors shall deem necessary or
desirable. Any two or more offices may be held by the same person, but no
officer may act in more than one capacity where action of two or more officers
is required.
Section 2. Election of Officers. The officers of the Corporation shall
be elected annually by the Board of Directors at the first meeting of the
Board of Directors held after each annual meeting of the shareholders or at
such time or times as the Board of Directors shall determine.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors at any time with
or without cause.
Section 4. Chief Executive Officer. If the Board of Directors
shall appoint a Chairman of the Board and shall designate the Chairman of
the Board as the Chief Executive Officer, the Chairman of the Board shall
serve as the Chief Executive Officer of the Corporation. If a Chairman of
the Board is not appointed by the Board of Directors or if the Chairman of
the Board is not designated as the Chief Executive Officer, the President (or
such other person as shall be named by the Board of Directors) shall be the
Chief Executive Officer of the Corporation. The Chief Executive Officer
shall, subject to the direction and control of the Board of Directors,
supervise and control the business and affairs of the Corporation. Such
officer shall, when present, preside at all meetings of the shareholders. The
Chief Executive Officer may sign, with the Secretary or any other proper
officer of the Corporation thereunto authorized by the Board of Directors,
certificates for shares of the Corporation, any deeds mortgages, bonds,
contracts or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall
be expressly delegated by the Board of Directors or by these Bylaws to some
other officer or agent of the Corporation, or shall be required by law to be
otherwise signed or executed; and in general the Chief Executive Officer
shall perform all duties incident to the position of Chief Executive Officer
and such other duties as may be prescribed by the Board of Directors from time
to time. The title of the Chairman of the Board or the President, as the
case may be, serving as the Chief Executive Officer may also refer to such
officer's position as Chief Executive Officer, but such additional
designation shall not be required.
Section 5. Chairman of the Board. The Chairman of the Board,
if and when elected, shall be chosen by and from among the Directors, shall
preside at all meetings of the Board of Directors if present, and shall, in
general, perform all duties incident to the office of Chairman of the Board
and such other duties as, from time to time, may be assigned
to him by the Board of Directors.
Section 6. President. Unless a Chairman of the Board has been
appointed and also designated as the Chief Executive Officer, the President
(or such other person as shall be named by the Board of Directors) shall be
the Chief Executive Officer of the Corporation and shall have all of the
duties and authority of that office. If the President is not the
Chief Executive Officer, the President, in the absence of the Chief Executive
Officer or in the event of such person's death or inability or refusal to
act, shall perform the duties and exercise the powers of that office and, in
addition, the President shall perform such other duties and shall
have such other authority as the Board of Directors shall prescribe. Unless
the Board of Directors shall otherwise provide, the President shall also be
the Chief Operating Officer of the Corporation and, subject to the control of
the Board of Directors, shall have all the duties and authority of that
office.
Section 7. Executive Vice President. The Executive Vice President, if
and when elected, shall familiarize himself with the affairs of the
Corporation, and, in the absence or disability of the President, shall
possess all the powers of and perform all the duties of that officer, and
shall have such other powers and duties as may be prescribed from
time to time by the Board of Directors.
Section 8. Vice Presidents. Each Vice President shall have
such powers and perform such duties as may be prescribed from time to time by
the Board of Directors. At the request of the President (or, if and when
elected, the Executive Vice President), any Vice President may act
temporarily in the place of the President.
Section 9. Secretary. The Secretary shall: (a) keep the minutes of
the shareholders' and of the Board of Directors' meetings in one or more
books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; (d)
keep a register of the post office address of each shareholder which shall
be furnished to the Secretary by such shareholder; (e) sign with the
Chief Executive Officer, or president, or a Vice President, certificates
for shares of the Corporation, the issuance of which shall have been
authorized by resolution of the Board of Directors; (f) have general charge
of the stock transfer books of the Corporation; and (g) in general perform
all duties incident to the office of the Secretary and such other duties as
from time to time may be assigned to him by the Chief Executive Officer, or
by the President or by the Board of Directors.
Section 10. Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
Corporation; receive and give receipts for moneys due and payable to the
Corporation from any source whatsoever, and deposit all such moneys in the
name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of
Article V of these Bylaws; and (b) in general perform all of the duties
incident to the office of Treasurer and such other duties as from time to
time may be assigned to him by the Chief Executive Officer, or President
or by the Board of Directors.
Section 11. Assistant Secretaries and Assistant Treasurers. The
Assistant Secretaries and Assistant Treasurers, in general, shall perform
such duties as shall be assigned to them by the Board of Directors or by
senior officers.
Section 12. Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Director and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Director of
the Corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any con- tract or execute and
deliver any instruments in the name of and on behalf of the Corporation,
and such authority may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries as the
Board of Directors may select.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificate for Shares. Certificates representing shares of
the Corporation shall be in such form, including non-certificated shares,
as shall be determined by the Board of Directors. Certificated shares shall
be signed by, or bear the facsimile signature of, the Chief Executive
Officer, the President or a Vice President and the Secretary or an Assistant
Secretary. All certificates for certificated shares shall be consecutively
numbered or otherwise identified. The name and address of the person to whom
the shares represented thereby are issued, with the number of shares and date
of issue, shall be entered on the stock transfer books of the Corporation.
All certificates for certificated shares surrendered to the Corporation for
transfer shall be cancelled and no new certificate for certificated shares
shall be issued until the former certificate for certificated shares for a
like number of shares shall have been surrendered and cancelled, except that
in case of a lost, destroyed or mutilated certificate, a new one may be
issued therefor upon such terms and indemnity to the Corporation as the
Board of Directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only (a) on the stock transfer books of the Corporation by the
holder of record thereof or by his legal representative, who shall furnish
proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and (b) on surrender for cancellation of the certificate
for such certificated shares. The person in whose name shares stand on the
books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes.
ARTICLE VII. FISCAL YEAR
The fiscal year of the Corporation shall be the calendar year unless
otherwise determined by the Board of Directors.
ARTICLE VIII. DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the
terms and conditions provided by law and its Articles of Incorporation.
ARTICLE IX. SEAL
The corporate seal shall be in the form as it now exists, unless otherwise
provided by the Board of Directors.
ARTICLE X. WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
Director of the Corporation under the provisions of the North Carolina
Business Corporation Act or under the provisions of the Articles of
Incorporation or Bylaws of the Corporation, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or
after the time stated therein, shall be equivalent to the giving of such
notice.
ARTICLE XI. AMENDMENTS
Except as hereinafter otherwise provided, these Bylaws may be amended or
repealed and new Bylaws may be adopted by the affirmative vote of a majority
of the Directors then holding office at any regular or special meeting of
the Board of Directors.
The Board of Directors shall have no power to adopt a Bylaw:
1. requiring more than a majority of the voting shares for a quorum at a
meeting of shareholders or more than a majority of the votes cast
to constitute action by the shareholders, except where higher
percentages are required by law;
2. providing for the management of the Corporation otherwise than by
the Board of Directors or its Executive Committee;
3. increasing or decreasing the number of Directors; or
4. classifying and staggering the election of Directors.
The Board of Directors shall have no power to readopt, amend or repeal a
bylaw adopted, amended or repealed by the shareholders if such bylaw does
not so authorize the Board of Directors.
ARTICLE XII. INDEMNIFICATION
Section 1. Extent. In addition to the indemnification otherwise
provided by law, the Corporation shall indemnify and hold harmless its
Directors and Indemnified Officers (as hereinafter defined) against all
liability and litigation expense, including reasonable attorneys' fees,
arising out of their status as Directors or officers, or in their activities
in any of the foregoing capacities. The Corporation shall also and to the
same extent indemnify its Directors and Indemnified Officers from activities
in any capacity in which they are or were serving at the Corporation's
request, in another corporation, partnership, joint venture, trust or other
enterprise; provided, however, that the Corporation shall not indemnify a
Director or Indemnified Officer against liability or litigation expense that
he may incur on account of his activities which at the time taken were known
or believed by him to be clearly in conflict with the best interests of the
Corporation. The Corporation shall also indemnify the Director or
Indemnified Officer for reasonable costs, expenses and attorneys' fees in
connection with the enforcement of rights to indemnification granted herein,
if it is determined in accordance with Section 2 of this Article that the
Director or Indemnified Officer is entitled to indemnification hereunder.
Section 2. Determination. Any indemnification under Section I shall be
paid by the Corporation in any specific case only after a determination that
the Director or Indemnified Officer did not act in a manner, at the time the
activities were taken, that was known or believed by him to be clearly in
conflict with the best interests of the Corporation. Such determination
shall be made (a) by the affirmative vote of a majority (but not less than two)
of all the Directors of the Corporation who are not or were not parties to
the action, suit or proceeding out of which the liability or expense for
which indemnification is to be determined arose, or against whom the
claim out of which such liability or expense arose is not asserted
("Disinterested Directors"), even though less than a quorum, or (b) if a
majority (but not less than two) of Disinterested Directors so direct, by
independent legal counsel in a written opinion, or (c) if there are less than
two Disinterested Directors, by the affirmative vote of all of the Directors,
or (d) by the vote of a majority of all of the voting shares other than those
owned or controlled by Directors or Indemnified Officers who were parties to
such action, suit or proceeding or against whom such claim is asserted, or
by a unanimous vote of all of the voting shares, or (e) by a court of
competent jurisdiction.
Section 3. Advanced Expenses. Expenses incurred by a Director or
Indemnified Officer in defending a civil or criminal claim, action, suit or
proceeding may, upon approval of a majority (but not less than two) of the
Disinterested Directors, even though less than a quorum, or, if there are
less than two Disinterested Directors upon approval of the Board of Directors,
be paid by the Corporation in advance of the final disposition of such claim,
action, suit or proceeding upon receipt of an undertaking by or on behalf of
the Director or Indemnified Officer to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified against such
expenses by the Corporation.
Section 4. Indemnified Officer. For purposes of this Article,
"Indemnified Officer" shall mean (a) each officer of the Corporation
who is also a Director of the Corporation or (b) each other officer who is
designated by the Board of Directors from time to time as an
Indemnified Officer; provided, however, that if any person ceases to be an
Indemnified Officer, then such cessation shall have no effect with respect to
actions arising prior to such time of cessation.
Section 5. Reliance and Consideration. Any Director or Indemnified
Officer who at any time after the adoption of this Article serves or has
served in any of the aforesaid capacities for or on behalf of the
Corporation shall be deemed to be doing or to have done so in reliance
upon, and as consideration for, the right of indemnification provided herein.
Such right shall inure to the benefit of the legal representatives of any
such person and shall not be exclusive of any other rights to which such
person may be entitled apart from the provisions of this Article. No
amendment, modification or repeal of this Article XII shall adversely affect
the right of any Director or Indemnified Officer to indemnification
hereunder with respect to any activities occurring prior to the time of such
amendment, modification or repeal.
Section 6. Insurance. The Corporation may purchase and maintain
insurance on behalf of its Directors, officers, employees and agents and
those persons who were serving at the request of the Corporation in any
capacity in another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such
liability under the provisions of this Article or otherwise.
Any full or partial payment made by an insurance company under any insurance
policy covering any Director, officer, employee or agent made to or on behalf
of a person entitled to indemnification under this Article shall relieve the
Corporation of its liability for indemnification provided for in this Article
or otherwise to the extent of such payment, and no insurer shall have a
right of subrogation against the Corporation with respect to such payment.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Appendix A to Item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,036,752
<SECURITIES> 0
<RECEIVABLES> 6,725,257
<ALLOWANCES> 100,000
<INVENTORY> 2,659,244
<CURRENT-ASSETS> 15,687,760
<PP&E> 143,207,130
<DEPRECIATION> 78,401,089
<TOTAL-ASSETS> 112,596,106
<CURRENT-LIABILITIES> 14,383,849
<BONDS> 2,169,000
<COMMON> 27,338,375
162,500
1,692,641
<OTHER-SE> 51,853,836
<TOTAL-LIABILITY-AND-EQUITY> 112,596,106
<SALES> 0
<TOTAL-REVENUES> 47,256,289
<CGS> 0
<TOTAL-COSTS> 36,061,416
<OTHER-EXPENSES> 2,470,516
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 13,665,389
<INCOME-TAX> 5,683,810
<INCOME-CONTINUING> 7,981,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,981,579
<EPS-PRIMARY> 5.32
<EPS-DILUTED> 5.28
</TABLE>
